Since VAT was introduced in the UAE back in 2018, it has been a big part of conducting business here. After you have made your way through the process of registering for VAT, then comes the matter of understanding how to handle your VAT obligations and one of the most important pieces of the puzzle is figuring out how to reclaim VAT in UAE.
Think of it this way: whenever your business pays VAT on purchases related to operations, you don’t necessarily have to absorb that cost. If the expense qualifies, you can recover that VAT when you submit returns. Managed effectively, this can free up cash, minimize your expenses, and put your business fully in line with the Federal Tax Authority (FTA).
In this article, we will walk through the essentials of the VAT reclaim process in the UAE, what it means, who’s eligible, how to apply, and the common mistakes businesses should avoid.
For most businesses, VAT is not an direct cost, it is a pass-through. You collect VAT on what you sell and pay VAT on what you purchase. At the end of the tax period, you offset the VAT that you paid (input tax) against the VAT that you collected (output tax).
If the tax output is more than the tax input, VAT refunds in UAE can be claimed. The mechanism prevents the business from being unfairly taxed and keeps the system neutral.
For example, if a company purchases AED 200,000 worth of goods along with AED 10,000 VAT and thereafter sells them for AED 250,000 along with AED 12,500 VAT. The company will be able to offset the AED 10,000 input VAT against the AED 12,500 output VAT, with only AED 2,500 remaining payable to the FTA.
Without being in a position to claim that VAT input tax credit, the business would end up paying twice, something the system is designed to avoid.
Not every business expense qualifies. To make a recover successfully, these conditions typically apply:
For instance, if your company is paying VAT on professional services, office rent, or supplies, then you can recover it. But if you are covering for employee entertainment or buying things for private use, such VAT cannot be recovered.
Recovering VAT in the UAE is fairly straightforward, but careful attention is required. Here’s how the VAT reclaim process usually goes down:
Make sure to keep all invoices in order, ensuring that they have the supplier’s TRN (Tax Registration Number) in place. This is the evidence that the FTA will demand.
VAT returns are submitted most times quarterly but some companies may have monthly filing. Within the submission, there is reporting of input VAT and output VAT.
Deduct your eligible input VAT from your output VAT. If you have been paid more VAT than you have paid, you remit the excess to the FTA.
If your input VAT is higher, you can claim refund through the FTA’s internet system. It needs to be supported by proper invoices and documents.
Your application will process by the FTA. In case everything goes well, your bank account will receive the refund.
Although the process appears simple, all companies run into issues. Some of the common challenges when trying to reclaim VAT in UAE include:
Because of these risks, most companies prefer to work with VAT consultants who manage the paperwork and ensure that all the requirements are met as per FTA standards.
VAT can be complex for businesses undertaking high levels of transactions or having cross-border transactions. Consultants can:
Verify transactions for appropriateness.
VAT return preparation and filing.
Process company refund requests.
Assist in VAT input tax credit maximization.
Handle the FTA for audit and inquiry cases.
Such professional support services reduce errors and ensure that companies do not miss out refunds that are due to them.
Apart from regular businesses, there certain special refund facilities within the UAE, such as:
It is by understanding these alternatives that businesses and individuals are able to optimize the VAT scheme benefits.
In order to ensure that the process remains hassle-free, businesses must:
Reclaiming VAT is not just a compliance requirement, it’s a financial opportunity for businesses in the UAE. By staying organized, filing returns accurately, and following the correct steps, companies can recover significant amounts through the VAT reclaim process.
The key is understanding the rules, avoiding common mistakes, and when needed seeking expert guidance. Done right, reclaiming VAT strengthens cash flow, keeps businesses compliant, and ensures they remain competitive in the UAE’s fast-growing economy.
Yes. Staff entertainment, personal spending, or anything other than business is not included. The FTA is quite specific that only business expenses qualify for VAT recovery.
If your documents are in order, the FTA will process refunds within a few weeks. In most instances, businesses will have money in their bank account within 20 working days.
Yes, they are. VAT recovery is not limited to large firms. SMEs can benefit greatly from VAT recovery, especially because it improves cash flow.
You may do it yourself, but most businesses prefer to let VAT experts handle things. They make sure claims are properly submitted and avoid mistakes that delay your refund.